Fitch Rates Fulton County Facilities Corp., GA's $120MM COPs 'AA-'; Outlook Stable

2009-06-26 22:36:03 -

Fitch Ratings assigns an 'AA-' rating to Fulton County Facilities Corp., GA's approximately $120 million certificates of participation (Fulton County, Georgia Public Purpose Project), series 2009. The bonds are scheduled for negotiated sale on July 14, 2009 with proceeds being used to refund outstanding series 1999 certificates of participation (COPs) for an estimated savings equal to approximately 3% of the

refunded COPs, depending on market conditions. In addition, Fitch affirms the 'AA-' rating on the Fulton County Facilities Corporation's $111.9 million in outstanding COPs. The Rating Outlook is Stable.

The 'AA-' rating on the certificates reflects Fulton County's underlying credit quality, which includes a low debt burden and rapid amortization of existing debt, a growing and diverse economic base, as well as the annually renewable lease structure under which rental payments are subject to appropriation, and the essentiality of the majority of leased assets.

Concerns related to the county's underlying credit quality include the inability to produce a certified tax digest in 2008, and a substantial decline in general fund balance over the last two years. An additional credit concern is the county's partnership with Dekalb County in the Fulton-Dekalb Hospital Authority, which is the parent organization of the Grady Health System (GHS, or the system). Despite both counties' ongoing commitment to provide sizeable annual operating subsidies to the system, GHS continues to operate with little to no available cash resources leaving the system's ability to continue operating in question.

Fulton County has a diverse economic base benefiting from Atlanta's role as the state capital and center of a broad regional economy. While the county's economy has shown signs of weakness in the current recession, Fitch believes long-term prospects are sound. The county's unemployment rate climbed to a high 9.3% in April 2009, though the figure remains almost even with the Atlanta metropolitan statistical area (MSA), the state, and the nation. Population growth has outpaced the state's and the Atlanta MSA's, increasing nearly 22% since the 2000 census. The majority of the county is built-out with nearly one-fifth of the MSA's population residing in Fulton County.

The county's real estate market continues to struggle as the 2009 tax digest is expected to decline in value by slightly more than 2% and single family housing starts throughout the Atlanta MSA showed a cumulative decline of almost 100% between 2006 and 2008 according to Global Insight, Inc. Due to a high number of tax appeals, the county's 2008 tax digest has still not been certified, though officials expect the matter to be resolved in the coming weeks. Income levels remain high at about 37% and 46% above the state and nation, respectively.

After peaking at a strong 23% of general fund spending and transfers out in fiscal 2006, the county's unreserved general fund balance declined substantially in the last two fiscal years. Additional support given to GHS as well as declining sales tax revenue and subsequent expense reductions that were not immediately realized at an equivalent pace following multiple incorporations that occurred in 2006 and 2007 culminated in a sizeable operating deficit in fiscal 2007. Fiscal 2008 ended with another sizeable draw of about $40 million according to unaudited financial results. The planned use of reserves reduced the unreserved, undesignated general fund balance to approximately $57 million, equal to 8.7% of spending and transfers out. Officials expect the county's reserves to stay at or slightly above its board-imposed policy of maintaining the unreserved general fund balance at or above 8.33%.

A substantial amount of pay-as-you-go financing and rapid debt amortization has resulted in very low debt levels historically. Overall debt, which includes the current offering and overlapping units, is $1,455 per capita and 1.03% of market value. Fitch continues to have concerns about the lack of a long-term capital plan as the magnitude of capital needs and availability of funding remain uncertain.

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Fitch Ratings, New YorkChristopher Hessenthaler, 212-908-0773Amy
Laskey, 212-908-0568orMedia Relations:Cindy Stoller,
212-908-0526Email: cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com